Rural Telco Associations Ask White House for Help on USF Reforms

Rural telcos have asked the White House to help save them from newly passed Universal Service Fund reforms. NARUC, meanwhile, decided to join the court challenge against October’s FCC USF reforms (CD Oct 28 p1), a state official told us.

In a Thursday letter to Agriculture Secretary Tom Vilsack, NTCA, OPASTCO and the Western Telecommunications Alliance said the newly enacted reforms, and the proposed reforms in the FCC’s further rulemaking notices, are a threat to rural telcos. “Although the FCC endeavored to direct the high-cost USF and ICC toward a more sustainable, broadband-focused path, the Order does not provide the mechanisms and support levels necessary to enable sustainable broadband in areas served by RLECs,” the groups wrote. “Instead,” they said, “through a combination of changes to existing USF and ICC programs, the FCC effectively reduced funding available to RLECs, implemented retroactively applicable limitations that ‘pull the rug’ from beneath RLECs that invested on the basis of then-existing federally administered programs, and imposed new requirements on rural carriers. In sum, RLECs are now expected to ‘do more,’ but with far less opportunity for network cost recovery."

Three in 10 carriers stand to lose more than 10 percent of their USF support “and 1 in 100 carriers lose more than 20 percent” of their support if the FCC’s reforms stand, the rural groups said. Agriculture’s Rural Utilities Service estimated in 2011 that nearly a quarter of its borrowers would fall to a lower lending risk category if USF cash were reduced by 5 percent, the rural groups noted.

"Of equal, if not greater concern, are a number of additional, potentially significant cuts proposed by the FCC in its Further Notice,” the groups added. “These are a sword of Damocles hanging over the prospects of rural investment, robust broadband, and economic recovery.” The further rulemaking proposes reductions in rate-of-return, more USF cuts for RLECs, the end of intercarrier revenues without provision for cost replacement, and “gerrymandering of RLEC service areas in a way that will, in a single stroke, obstruct recovery of existing investments and diminish greatly the prospects for future investment,” the associations said.

The White House Rural Council can help, the rural groups said. They asked the White House to have the FCC “expressly decline to act on several further aspects of its Further Notice” and instead give “adequate time” -- of up to five years -- to allow RLECs to adjust to the new rules. “Moreover, since carriers cannot ‘undo’ loan commitments or ’tear out’ existing networks, the FCC should make clear that any caps or other limitations on cost recovery already adopted in its Order will be applied prospectively,” the letter said. “The retroactive application of caps violates fundamental fairness and disrupts any notions of certainty that are the hallmark of rational rulemaking.” Rural groups struck a last-minute deal with price cap carriers ahead of the USF order. Since the order appeared in the Federal Register, rural telcos have challenged the reforms on a number of fronts. NTCA has sued, while OPASTCO and the National Exchange Carrier Association have petitioned the FCC to reconsider.

NARUC expects to file its legal challenge to the reforms. Its brief will be filed Friday or Monday at the U.S. Court of Appeals for the D.C. Circuit, a state official said. The case will then be consolidated with other appeals in the U.S. 10th Circuit. NARUC has passed resolutions that are clearly against state preemption and aimed at collaborative federalism, the state official said.